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Dynamic R&D Competition

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Author Info
Gene M. Grossman
Carl Shapiro

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Abstract

We study a simple, two-stage, stochastic patent race involving two firms. We examine the behavior of the participants as they gain the lead or fall behind in the race. We find that the leader engages in R&D more intensively than does the follower, and that both firms intensify their efforts if the follower does catch up with the leader. We also analyze (1) the attractiveness of licensing, whereby the leader shares his results with the follower,(2) a policy of issuing patents for intermediate research results, and (3) the effects of research joint ventures, whereby the firms coordinate their initial research efforts and share their results.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1674.

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Date of creation: Mar 1988
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Handle: RePEc:nbr:nberwo:1674

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June. [Downloadable!] (restricted)
  2. Shapiro, Carl, 1985. "Patent Licensing and R&D Rivalry," American Economic Review, American Economic Association, vol. 75(2), pages 25-30, May. [Downloadable!] (restricted)
  3. Kenneth L. Judd, 1985. "Closed-Loop Equilibrium in a Multi-Stage Innovation Race," Discussion Papers 647, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  4. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August. [Downloadable!] (restricted)
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  5. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March. [Downloadable!] (restricted)
  6. Harris, Christopher & Vickers, John, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Blackwell Publishing, vol. 52(2), pages 193-209, April. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. C. Halmenschlager, 2003. "Les externalités de diffusion du savoir-faire permettent- elles de rattraper le retard dans les courses à l'innovation," Working Papers ERMES 0304, ERMES, University Paris 2. [Downloadable!]
    Other versions:
  2. Chaim Fershtman & Morton I. Kamien, 1990. "Cross Licensing of Complementary Technologies," Discussion Papers 866, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  3. Jay Pil Choi, 1999. "A Dynamic Analysis of Licensing: The Boomerang Effect and Grant-Back Clauses," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  4. Alka Chadha & Åke Blomqvist, 2005. "Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective," Departmental Working Papers wp0513, National University of Singapore, Department of Economics. [Downloadable!]
  5. Aikaterini Kokkinou, 2005. "Entrepreneurship, Innovation Activities and Regional Growth," ERSA conference papers ersa05p419, European Regional Science Association. [Downloadable!]
  6. David Gill, 2004. "Strategic Disclosure of Intermediate Research Results," Economics Series Working Papers 211, University of Oxford, Department of Economics. [Downloadable!]
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  7. Daron Acemoglu, 2005. "Equilibrium Bias of Technology," NBER Working Papers 11845, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Alexandre Gaudeul, 2004. "Open Source Software Development Patterns and License Terms," Industrial Organization 0409008, EconWPA. [Downloadable!]
  9. Tucci, Christopher L. (Christopher Luigi) & Cusumano, Michael A., 1954-, 1994. "Benefits and pitfalls of international strategic technology alliances," Working papers 3706-94. WP (Internationa, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  10. Nguyen, Thang, 2004. "Technological Progress in Races for Product Supremacy," MPRA Paper 235, University Library of Munich, Germany, revised 01 Nov 2006. [Downloadable!]
  11. Leandro Arozamena & Estelle Cantillon, 2000. "Investment Incentives in Procurement Auctions," Cowles Foundation Discussion Papers 1276, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
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